Key Changes To Nigeria’s Tax Laws, Impact On Household Incomes

Nigeria’s Tax Act 2025 introduces a major shift from what many have termed a “colonial tax structure” to a more modern, people-focused system aimed at improving efficiency and boosting revenue.

The reform exempts individuals earning ₦800,000 or less annually and small businesses with turnovers under ₦100 million, offering relief to many households. However, with Nigeria’s tax-to-GDP ratio at just 13.5%, critics question whether such broad exemptions are sustainable while targeting ₦50 trillion in revenue and addressing a 70% tax gap.

Larger corporations now face steeper obligations, with capital gains tax rising from 10% to 30% and a new 4% development levy introduced. While the goal is to tax high earners more fairly, there are concerns about the impact on investment and job growth.

Additionally, the VAT distribution formula has been revised, reducing the Federal Government’s share to 10% and increasing states’ to 55% raising questions about how this shift will play out across regions.